Afternoon:
9°c
There was little for stock market investors to cheer when trading resumed this morning after the weekend break. Another major sell-off in shares of Lloyds Banking Group, following Friday's shock news of losses totalling almost £11 billion at its newly acquired HBOS subsidiary, combined with the biggest collapse in the Japanese economy for 30 years to drive share prices lower.
On top of that was Wall Street's closure this afternoon for Presidents' Day birthday. Against such a gloomy backdrop, share prices in London had only one way to go - down. But the losses were not as bad some might have feared and the FTSE 100 index managed to restrict is deficit to 28.97 at 4160.62.
Naturally enough, it was the banks that led the market lower. After a tentative start, Lloyds Banking Group was eventually uncrossed at 52.8p, before rallying a tad to trade at 54.5p, a fall of 6.9p, despite denying speculation that the majority of its shares will soon be owned by the Government. The shares have fallen more than 40% during the past couple of trading sessions and 80% since merger with HBOS was first pressed on the company.
Royal Bank of Scotland, the other bank maintained in the Government's golden circle of bailed-out banks, fell 0.8p to 21p, while Barclays shed 6.5p to 94p. Other financials also came under the hammer, including Legal & General, where there is persistent talk of a rights issue, down 1.6p at a record low of 47.9, and Prudential, 7p cheaper at 313¾p.
UBS has begun coverage of two oil explorers Tullow, 5p better at 731½p, and Soco International, a penny better at 1161p. It has started with a buy rating on both companies and an 1830p target on Soco. UBS has also raised it rating on BT Group. up 0.8p at 99.8p, from sell to neutral with a 95p target in the wake of last week's gloomy trading update. The broker reckons the shares have fallen far enough but warns there are still too many risks to get excited. The valuation is not attractive with key performance indicators having weakened. BT needs to protect the top line and the broker sees fibre technology as the answer. But it will need "aggressive investment".
Goldman Sachs has raised its rating for Halma, ½p softer at 179p, from sell to neutral because it believes that the deteriorating outlook for the group, which develops hazard detection and life protection products, is priced in.
Halma has indicated profits for the year to 31 March are within the City's range of forecasts, but towards the lower end. The broker has trimmed its target from 190p to 185p.
Investors in Tokyo remained cool when share trading resumed today, shrugging off data showing Japan's economy suffered its biggest fall in over three decades, while a stronger yen weighed on exporters such as Canon.
The Nikkei 225 briefly ventured into positive territory before closing down 29.23 points at 7750.17. Japan's economy shrank 3.3% in the fourth quarter, the biggest drop since 1974 and further confirmation that the world's second-biggest economy is in a severe recession. With the US closed this afternoon, market players were turning their attention to tomorrow's deadline for struggling US car makers to submit a new restructuring plan to the government.
Losses in the overall market were limited as the economic uncertainty sent investors flocking to so-called defensive and domestic demand shares, with West Japan Railway rising 5.2% to 365,000 yen and other railway firms also performing well.
Hong Kong shares fell sharply following a slow start as investors sold HSBC and Bank of East Asia as the earnings season kicks off. Bank of East Asia, which leads the results tomorrow, was down 4.9%, with analysts predicting a 90% drop in the bank's 2008 profit partly on account of its exposure to collateralised debt obligations.
The Hang Seng index ended down 98.79 points at 13,455.88.
